UPDATE: Goldman Sachs Downgrades NuVasive as Industry Headwinds, Valuation Pose Downside Risk

In a report published Monday, Goldman Sachs analyst David H. Roman downgraded the rating on

NuVasiveNUVA from Neutral to Sell, and lowered the price target from $25.00 to $22.00. In the report, Goldman Sachs noted, “We downgrade NuVasive shares (NUVA) to Sell from Neutral and lower our 12-month price target to $22 from $25, representing 16% downside potential vs. 4% average upside for the rest of our coverage. We see the stock's valuation and recent outperformance (+3,600bp vs. the Russell 2000 ytd) as unwarranted given industry headwinds and potential downside to outer year numbers, notwithstanding 2012 underperformance. While lumbar fusion insurer pushback seems to have eased in recent quarters, our conversations with industry participants point toward pressure in other spinal implant categories, such as cervical (represents 10%-12% of NuVasive's sales and is expected to account for around 25%-30% of 2013E revenue growth). The ongoing OIG investigation into NuVasive's CMS reimbursement filings is also a risk that is hard to quantify or assess outcomes. Finally, on a like-for-like accounting basis, NUVA shares trade at significant premium to orthopaedic/SMID-cap peers – 77X P/E for 2014E vs. peer group at a 16X mean.” NuVasive closed on Friday at $24.32.

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